Most families in the U.S. are on financially unsteady ground even as the national economy appears to be recovering from the recession, according to an analysis from The Pew Charitable Trusts. 

The majority of families face financial strain across all balance sheet elements: income, expenditures and wealth. Fully 70% of households face at least one of these problems, with many confronting two or even all three. Along with being savings-limited, households face other financial challenges - just under half of families are "income-constrained," reporting household spending greater than or equal to their income and 8% are "debt-challenged," with payments equal to 41% or more of their gross monthly income.

The report, The Precarious State of Family Balance Sheets, draws from multiple nationally representative data sources to develop a clear picture of household financial security in the U.S.

"Our analysis finds that many American families, even those with relatively high incomes, are walking a financial tightrope," said Erin Currier, director of Pew’s financial security and mobility project, in a news release on the analysis. "Many have little if any cushion to absorb an unexpected financial setback. It’s a precarious state that threatens not just financial security, but upward mobility."

The findings in the report reveal widespread financial fragility:

  • Although income and earnings have increased over the past 30 years, they have changed little in the past decade. The typical worker had wage growth of 22% between 1979 and 1999, but just 2% from 1999 to 2009.
  • Substantial fluctuations in family incomes are the norm. In any given two-year period, nearly half of households experience an income gain or drop of more than 25%, a rate of volatility that has been relatively constant since 1979. 

  • The majority of American households (55%) are savings-limited, meaning they can replace less than one month of their income through liquid savings. 

  • Even when pooling all of its resources - including from accounts that are potentially costly to access, such as retirement accounts and investments - the typical middle-income household can replace only about four months of lost income.

The report concludes by noting that policymakers should focus on policies and programs that support asset accumulation, which can help meaningfully improve American families’ financial standing, according to the news release.

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